FSOC Starts Clock on Designating A Non-Bank as Systemically Significant

The Financial Stability Oversight Council has started the clock on a six-month process for designating a non-bank as systemically significant.

Ryan Schoen and others at Washington Analysis said Friday in an investor’s note, “While FSOC did not disclose which companies were considered in today’s meeting, we expect the list to be short (probably no more than five to seven institutions), including, but not limited to, AIG, MetLife, Prudential and General Electric.”

In a statement to reporters, a Treasury Department spokesman confirmed the FSOC is entering the “third stage” of its process to determine whether an institution should be designated SIFI.

According to Schoen, the “third stage” gives the companies an opportunity to respond to a request for information and to request a hearing to contest the proposed designation.

Schoen said that, based on the timelines laid out in the statute and regulations, Washington Analysis expects the final designations to come in either in December or in the first quarter of 2013.

Before the FSOC publicly announces its final determinations, it will provide the non-bank financial company formal notice of at least one business day, Schoen said.

A spokesman for MetLife declined comment. AIG and Pru did not respond to requests for comment.

However, a MetLife spokesman noted that until the sale of its bank to GE Capital is approved, MetLife is already under supervision by the Federal Reserve Board as a bank-holding company.

Under Sec. 113 of the Dodd-Frank Act, the FSOC may designate non-bank financial companies for supervision by the Federal Reserve System under enhanced prudential standards if it determines such companies could pose a threat to U.S. financial stability.